–Uncertainty:Jim Tankersley looks at evidence of decreasing uncertainty. “The semi-secret of the last five months is that, by several measures, uncertainty is plunging and confidence is rising. Here’s the first: the Economic Policy Uncertainty Index built by Stanford and University of Chicago economists, which is as close as we’ve got to actual quantification of uncertainty effects in the economy. Look how fast it has fallen since January, to nearly its lowest level in three years. That’s because the fiscal cliff deal ended years of will-these-rates-expire questions about tax policy, and also because financial threats from Europe appear to be receding, according to Stanford’s Scott Ross Baker, one of the researchers who compiles the index. At the same time, consumer confidence is up to pre-recession levels.”

–Youth Unemployment:Kate Allen looks to measure youth unemployment in Europe. “Youth unemployment figures are meaningless without understanding what proportion of a country’s young people are economically active. This vital bit of information leads to quite a different picture on youth unemployment across Europe… Unemployment figures only reflect the proportion of the population who are economically active – ie. looking for a job, but unable to find one. Among young people in particular, inactivity rates can be expected to be very high – many are in either education or training. What do the figures look like if we take into account the economically inactive population? Far less bad, actually, even with the caveat that some individuals will go into training or education because of the lack of jobs.”

–Inflation:M. Henry Linder, Richard Peach and Robert Rich of the New York Fed examine goods vs. services inflation. “Among the measures of core inflation used to monitor the inflation outlook, the series excluding food and energy prices is probably the best known and most closely followed by policymakers and the public. While the conventional “ex food and energy” measure is a composite of the price changes of a large number of different products and services, almost all models developed to explain and forecast its behavior do not distinguish between the goods and services categories. Is the distinction important? Here, we highlight the different behavior and determinants of goods inflation and services inflation and suggest, based on preliminary analysis, that we can improve the forecast accuracy of this conventional core inflation measure by combining separate inflation forecasts of the two categories.”

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